evopilot: I am pro-NEA but even so there is much uncertainty in...

evopilot: I am pro-NEA but even so there is much uncertainty in it's future.

On my best estimates (based on Sep & Dec 2012 4C of $2.6m and $2.7m customer receipts) if Nearmap sold nothing new in the coming quarter they will report negative cashflow of around $800k.

This is to say unless they can continue new enterprise & group sales the business is not yet in a *consistent* cashflow positive position. That said, it may still be outright profitable due to the past two quarters (the past two quarters net *recurring* cash inflow is > than the projected next two quarters of losses, assuming *zero* new sales, and constant costs).

The next two quarters will be significant because they complete the first full year of the paywall introduced in Dec 2012, and everyone wants to know what the recurring baseline revenue will be going forward -- that is the data we need to be able to sensibly value the business.

You can't take the net cashflow from the 4Cs at face value because there were significant one offs (the last of IP licensing payments of $2.3m, and a $1.5m R&D tax offset). If you're trying to value the business you want to consider the *sustainable* level of business which is Nearmap's subscription revenue.

On the data that we have today, assuming zero new sales, we're looking at a business that for FY2012 will have recurring bottom line profit (NPAT) of around $2.5m/year.
At 30c/share the company is valued at $100m which puts your PE multiple at 40x.

Of course Nearmap are out selling so the above is only a baseline. The trouble is unless you have some inside info what is the reasonable level of expected sales in the next two quarters?

If you think they can sustain the current level of sales then you're talking about a business that might generate $8-10m NPAT. In which case your multiple at 30c/share drops to 10-12x which suddenly seems cheap.

But that is all dependent on:
- selling to roughly the same number of *new* customers as previous quarters
- costs not rising, which they have from March to June (other working capital rose from $1.3m to $1.66m)

This is all to explain that there are many variables at play which is why the price is so volatile.

IMHO NEA has a bright future but there is insufficient data to value the company. Investment in NEA can still only be considered a speculative play.